Question

Perform a horizontal, common-size analysis of the balance sheet items, using 2017 as the base year (meaning each line item for 2017 is 100%). Also include a horizontal analysis of sales and net income.

Balance Sheet
April 30
(in thousands of dollars)
	2019	2018	2017
Assets:
Current assets	$ 1,700	$1,120	$1,544
Plant and equipment (net)	8,110	7,830	5,404
Other assets	1,004	695	772
Total assets	$10,814	$9,645	$7,720
Liabilities and Stockholders' Equity:
Current liabilities	$   950	$  880	$  772
Long-term liabilities	2,023	1,591	1,544
Capital stock ($10 par)	4,600	4,600	3,000
Paid-in capital in excess of par	770	770	386
Retained earnings	2,471	1,804	2,018
Total liabilities and stockholders' equity	$10,814	$9,645	$7,720

Income Statement
For the Year Ended April 30
(in thousands of dollars)
	2019	2018	2017
Net sales	$38,610	$32,175	$25,740
Cost of sales	25,100	19,950	15,400
Gross profit	$13,510	$12,225	$10,340
Selling expenses	7,700	6,565	5,148
Administrative expenses	4,270	4,175	3,861
Total operating expenses	$11,970	$10,740	$ 9,009
Operating income	$ 1,540	$ 1,485	$ 1,331
Interest expense	115	95	100
Net income before tax	$ 1,425	$ 1,390	$ 1,231
Income taxes	655	645	541
Net income	$   770	$   745	$   690

Answer 1

Correct Answer:

Horizontal Common-Size Balance Sheet
Apr-30
(in thousands of dollars)
	2019	2018	2017
Assets:
Current assets	110.1%	72.5%	100.0%
Plant and equipment (net)	150.1%	144.9%	100.0%
Other assets	130.1%	90.0%	100.0%
Total assets	140.1%	124.9%	100.0%
Liabilities and Stockholders' Equity:
Current liabilities	123.1%	114.0%	100.0%
Long-term liabilities	131.0%	103.0%	100.0%
Capital stock ($10 par)	153.3%	153.3%	100.0%
Paid-in capital in excess of par	199.5%	199.5%	100.0%
Retained earnings	122.4%	89.4%	100.0%
Total liabilities and stockholders' equity	140.1%	124.9%	100.0%

Horizontal common-size Income Statement
For the Year Ended April 30
(in thousands of dollars)
	2019	2018	2017
Net sales	150.0%	125.0%	100.0%
Cost of sales	163.0%	129.5%	100.0%
Gross profit	130.7%	118.2%	100.0%
Selling expenses	149.6%	127.5%	100.0%
Administrative expenses	110.6%	108.1%	100.0%
Total operating expenses	132.9%	119.2%	100.0%
Operating income	115.7%	111.6%	100.0%
Interest expense	115.0%	95.0%	100.0%
Net income before tax	115.8%	112.9%	100.0%
Income taxes	121.1%	119.2%	100.0%
Net income	111.6%	108.0%	100.0%

End of Answer.

Thanks